Deutsche Börse and HQLAX have partnered for the creation of a securities lending solution using the R3 Corda blockchain platform.
The partnership between Deutsche Börse and HQLAX is expected to foster market adoption by enabling connectivity with HQLAX, for both trade execution and post-trade processing.
Using Corda’s blockchain technology, Deutsche Börse and HQLAX aim to build a fully integrated front to back operating model to facilitate more efficient collateral management of liquid assets.
According to HQLAX, these assets are in heightened demand due to the implementation of bank regulations for liquidity, mandatory clearing and margin requirements for over-the-counter (OTC) derivatives.
The trading layer will be delivered exclusively by Deutsche Börse’s Eurex Repo platform, which will enable market participants to leverage existing connectivity to the Eurex repo service.
Deutsche Börse Group will also play a lead role in the custody agnostic, post-trade processing layer, which is designed to interoperate with multiple collateral agents and custodians.
HQLAX aims to help market participants redistribute collateral liquidity more efficiently, by improving interoperability for pools of securities residing in multiple, disparate settlement systems and locations.
In the HQLAX operating model, legal title transfer of baskets of securities will be achieved by the transfer of ownership of HQLAX digital collateral records (DCRs) while the underlying securities remain static within DCR-linked custody accounts.
The use of DCRs to effect transfers of securities will, according to Deutsche Börse, enhance regulatory transparency, mitigate systemic risk, reduce operational risk, and help financial institutions mobilise collateral and manage capital more efficiently.
Guido Stroemer, CEO of HQLAX, said: “Our goal is to mobilise liquidity across pools of collateral currently residing in disparate custody accounts around the globe.”
He added: “Partnering with Deutsche Börse enables us to maximise the network effect that will drive widespread adoption of the HQLAX platform. We look forward to further collaboration with the broader community of collateral agents and custodians.”
David Rutter, CEO of R3, commented: “Partnering with a market leader like Deutsche Börse is a major milestone for HQLAX, and Corda is the perfect choice of platform. It was built from the ground up to enable businesses in complex and often highly regulated markets to overcome real-world challenges like this those associated with securities lending.”
Philippe Seyll, executive manager at Deutsche Börse, said: “With the creation of a neutral custody agnostic control layer, Deutsche Börse is embracing distributed ledger technology and complements it with a neutral and trusted market infrastructure role open to multiple custodians and collateral agents.”
He added: “This way Deutsche Börse supports market participants to deal with the global regulatory framework whilst reaping the benefits of the leading edge distributed ledger technology.”
Image: Shutterstock 